Running and managing a business is extremely tough at the best of times, even if business is booming and you happen to be doing extremely well.
Believe it or not, but there are businesses out there that are making vast amounts of money every single day, are busier than ever before, yet they are still haemorrhaging money. Just because you are busy and are enjoying a great deal of custom, this is not necessarily a sign that you are financially successful, as, although people like to overcomplicate things in the business world, it all basically comes down to money in versus money going out. In simple terms, it doesn’t matter how busy you are, if your expenses and overheads are higher than the amounts of money you are making, then of course you are going to struggle. You may not even realize it yet, but financially your business could be in distress and could be in danger of sinking and going under altogether. If you’re worried your business could be in danger of going under, or if you simply want to ensure that you are well protected for the worst case scenario in the future, here’s a look at a few warning signs that your company is struggling financially, and what you can do to put things right.
Taking out loans far too frequently
Unless you happen to be starting up a very small business, or unless you have a great deal of savings at your disposal, the chances are that to get your business up and running, you will need to take out business loans. Business loans are perfectly normal and they are essential in most cases as there are a number of expenses associated with starting your own business up, many of which you may not have even considered. If however, you have been trading for a while and still find yourself needing to take out loans on a semi-regular basis, this is a clear cut sign that your finances are not in order. Loans such as bank loans and credit cards are very useful when you are struggling, but the problem is that some people seem to think that they can take out loan after loan, and simply transfer it from one location to another. They may perform balances transfers for example, yet what they don’t realize is that by taking out too much credit and too many loans, they are in danger of seriously harming their credit rating. The lower their rating, the harder it becomes for them to take out future loans and to apply for credit in the future. One solution for this could be to consolidate your debts and loans to basically put all your debts into one place and pay them off at the same time. You may even wish to consider trying to find a professional investor who may offer you a little more lenience and leeway in regards to making payments.
Falling behind with bills
If you find your company falling more than two months behind with bills and payments, alarm bells should start ringing as this is another sign that you may be struggling with your finances. Most businesses fall behind with certain bills and payments every now and then, and most of the time the issues are resolved over the next few weeks, but if you are more than two months behind, this is a sign that something is wrong. Although not a cause of failure, a lack of cash is of course a symptom, and however you look at it, if you don’t have cash then you can’t pay your bills. If this sounds familiar to you however, then don’t panic, because there is always a solution. One thing you can do is to take the time to sit down and go over each and every single expense your business incurs, and to budget and look for ways of getting your expenses lower. Whether this means moving to a smaller office and downsizing, switching insurance providers, switching energy providers, working harder, running promotional sales, or anything else, if it is going to save you money and/or make you extra money, you should do it. With the money saved, use this to start paying off your debts so you can get in front once again.
Using your own savings
Whilst it is normal for business owners to use their own money and savings to get their business up and running, if you find yourself having to dig into your own pocket in order to cover expenses and bills etc, something is not right, as your business is supposed to be making money for you, rather than relying on you spending money on it. Once you are up and running, you should never have to pay for anything out of your own pocket, and if you do, you know that something is very wrong. If however, you are suffering from a temporary cash flow issue, and you know why you are, and that things will soon be back to normal, you can make an exception, but if you are having to do it again and again, this is a clear red flag. The only options for you here are to try to find other means of paying your bills and expenses, or sadly cutting your losses and focussing on an exit strategy and looking to the future before you sink any further.
Cost cutting and no pay rises
A business is only as good as its employees, and business owners will know that in order for a business to be deemed as a success, employee morale must be kept up at all times. A great way of boosting morale is offering salary increases, but beware that the exact opposite is true if you are unable to do so for a long time, or worse still, if you have to cut wages. If you are unable to offer your employees a pay rise after years of service, this could tick them off a little. If however, you are having to cut wages, cut hours, and find other ways of cutting costs, morale will take a real battering, which is the last thing an already struggling business will need. Cutting wages should only, only be done as a last resort, so unless essential, don’t do it. If you do, sadly you must resign yourself to the fact that you will lose employees and have to operate in an incredibly negative atmosphere where morale is at rock bottom. If this applies to you, you may wish to seek legal advice or speak to an insolvency expert to explore which options you have left.
Slashing price quotes
Of course no matter where you look, virtually all businesses will have to deal with competition in some form or another, and many businesses will lower their prices in order to try to attract customers and steal custom from their competitors. Whilst it is perfectly fine to be competitive, if you are struggling financially as it is, unless you can realistically see offering much lower prices as a viable means of getting sales figures into the black, then you should never do this. You are already struggling as it is, by offering competitive prices, so if you slash prices even lower, although you may see some new customers, more often than not this still will not be enough to get yourself out of the financial hole that you are digging for yourself.
Declining sales growth
Although nothing is certain in the business world, and there are many factors that could affect sales, such as the economy, competition, or even the weather, generally speaking you should be making more money every single year, or at the very least, you should be making roughly the same amount each year. If your sales figures are declining however, something is wrong and it will need to be addressed. If this does indeed apply to you, you should speak to your accountant and utilize them for more than just keeping your books in order. A financial advisor will also be very helpful in this instance, as they are well versed in the goings on of business and they will be able to provide you with help and advice on what you should do to get your sales back up. Promotional sales and marketing campaigns are both viable avenues that will be recommended and should be explored.
All businesses will see lulls and slumps in sales from time to time, and if you have been struggling, the first thing to remember is that you should not panic. It may look bleak, but there is always a solution and a way out, and there are many people out there who can help you. Whether you seek a private investor, or a business turnaround expert who may be able to offer free help and advice to help turn things around in a relatively short amount of time, there are always ways of helping yourself. Keep calm, do your research, speak to the experts, and within a few months time, you should be able to notice vast improvements.